Something Had To Happen -- But OnLive Employees Didn't Expect The End

All of OnLive's 200 employees worked daily with the cloud gaming service's traffic numbers and knew that something big had to happen for the company around this time of the year. That's not to say all of them expected to lose their jobs, no severance, no benefits, no nothing.

That's according to a former OnLive employee present for yesterday's meeting, at which the effective end of the company was announced. OnLive's assets have been acquired by an unnamed investor, and a statement yesterday said all of its services will continue for subscribers. The problem is, there didn't appear to be enough of them to sustain the ambitious venture.

Published reports, in particular one from Joystiq, have said that OnLive CEO Steve Perlman told workers the company was averaging 1,600 concurrent users on a service with 8,000 servers requiring maintenance.

While Kotaku's source didn't recall Perlman using figures that specific in the meeting, the source also didn't refute the claim.

"[Perlman] had broken the news that the company had ceased to exist," said the former employee. "As soon as you hear that phrase, you kind of stop listening. You're more thinking, 'what's the state of my resume...'"

As employees whipped out cell phones to text friends or loved ones, they were told they would be receiving no severance and any stock options, if they held them, now had no value as the company was no more. Their only assistance as they find new jobs will come from public unemployment benefits. Some may be asked if they want to contribute to the transition effort the new venture will undertake with OnLive's assets, but it didn't sound like an attractive offer. They'll be paid only in stock options offered by the new company, which will have value only if it is acquired or taken public.

Reaction to Perlman's decision to pursue what is called an ABC -- an Assignment for the Benefit of Creditors -- was mixed, said the former employee. An ABC is not bankruptcy; it's a form of protection akin to bankruptcy, albeit taken at the state level. A troubled company's assets are assigned to a third party, which allows the old company some kind of breathing room to settle its affairs without a bankruptcy trustee running things.

It's not Chapter 11 reorganisation (a common form of bankruptcy that doesn't dissolve the company) nor is it outright liquidation under Chapter 7 of the bankruptcy code, but it is a "destructive" end to the company, said Kotaku's source. Many had been hoping that OnLive would by now either have been acquired, or have been given a bridge loan to stay operating. Those around the watercooler knew the math: the company's annual operating costs were reasonably estimable, the revenue was likewise not a secret. "We knew something had to happen between August and September," the source said.

Weak numbers and a rival's enviable acquisition sent a message OnLive wouldn't have a chair when the music stopped

Sony's acquisition of cloud gaming service Gaikai in July was spun by management as a potentially good thing, but also seemed to be a warning signal that OnLive was going to be left without a chair when the music stopped. Perlman told employees that it showed an endorsement of cloud gaming technology by a console manufacturer, and it set an acquisition price where none existed before. But it was also a blow to morale that Gaikai ended up with Sony and not OnLive, which had been hoping for one for some time.

As the year wore on and OnLive's marketing and licensing teams, ones typically asking for money to sign up new releases or visit trade shows, were finding requests for travel denied, a sure sign things were going south. OnLive did send a representative to Gamescom, said the source, but other lesser, yet still important industry functions and roadshows were not attended.

Kotaku's source declined to provide specific figures on what OnLive's paid subscriber base or average concurrent traffic was, beyond the fact employees were aware something needed to happen soon. In interviews, Perlman never enumerated the company's number of subscribers, but has been quoted saying it was in the millions. Industry analysts pegged it at two million. How many of those were free or inactive account holders versus paying customers is unknown.

When the meeting broke up, there was the ritual exchanging of hugs and gallows humour among the laid off. "One of the things we were successful at with OnLive, there was a real community, not just in its engineering or some other team," the former employee said. "You could either get really angry or you could laugh. There was more laughter than anger, in my opinion.

"People were hugging, saying, 'I guess I need a box for my things,' figuring out what bar we were meeting at, so we can go get some tequila."


    This is sad, but they would have seen it coming. Word travels fast, I was working at a The Warehouse store, and we all knew closure was coming. By the time it rolled around, most of the old staff had left, a few got new jobs but held onto their original one for severance bonuses, but most of the staff that lost their jobs were casuals, and they knew what they were getting into.

    It's sad, but I'd be very surprised if they weren't prepared for this, at least somewhat.

    Not surprised that it was a failure in the slightest. They took the freedom / ownership from gamers and had ZERO advertising.

      Freedom taken away? They presented a new system of distribution, this has nothing to do with taking away freedoms.

        Read into the comment, if this is what people think (regardless if its true) onlive did something spectacularly wrong with their marketing which ain't a great start

          Taking away freedom has nothing to do with marketing, people are just stupid when a new distribution system comes along. People still say the same about Steam...

            Yeah, it does, it’s a perceived negative ideology that Marketing is supposed to remedy (what you want your consumers to think etc) if people are misguided enough to think their liberties are being taken away then Onlive didn't convey an alternative way of thinking or address consumer concerns. Its just one unhealthy reason why a company would collapse, the user actually has to have the confidence to sign up to this stuff and Marketing is the company holding their hand out and asking someone to give it a try and get on board.

      "ownership" does not require physicality

    Wasn't the ultimate business aim of both Onlive and Gaikai to be bought out from day one?

    Onlive made it difficult for themselves by requiring a separate console and controller, where as Gaikai did not... which probably made it the more attractive acquisition option.

    Not entirely surprising - consumers don't trust the technology enough yet. It was an idea ahead of its time, and furthermore it wasn't for everybody - and the selection wasn't wide enough.

    If they had provided older games, back-catalogs and some exclusives, it might have fared better.

    If they had gone global they would have had a fair chance of survival. I tried using it, would have subscribed too, if only they hadnt been so Yankee centric . Lotta people in Australia who would have loved it.

    Scary to see them get the news like that and nothing to help them with new jobs. I hear to often of a company having everyone terminated out of the blue. At least give people 2 weeks notice!

    I don't know if broadband speeds and pricing are where they need to be for this sort of a service to be feasible. It's a pity because it's a brilliant idea - especially as there is a massive untapped market of PCs that are not up to spec with the current generation.

    Also I'm not in America and therefore can't judge but the earlier comment about lack of advertising is important - it is the lack of promotion which killed the Turbografx-16. We all knew what OnLive was because we're interested in the industry - I guarantee you that nobody outside of readers of these blogs knew what it was.

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